There were several initiatives that Tadawul had embarked on, which contributed to upgrading the post-trade function as illustrated above. In addition, fails management controls were also introduced to deal with a situation where shares were not available to complete a sale.
Enhancements were made to the Independent Custody Model (ICM), which permits custodians A financial institution that holds customers securities for safeguarding to minimize the risk of their theft or loss. It can also be a clearing member for banks, corporations, foreign investors and institutional investors. They clear the trade by ensuring pay-in/pay-out of securities to hold shares on behalf of investors. The ICM Independent Custody Model enables custodians A financial institution that holds customers securities for safeguarding to minimize the risk of their theft or loss. It can also be a clearing member for banks, corporations, foreign investors and institutional investors. They clear the trade by ensuring pay-in/pay-out of securities to reject the settlement of unconfirmed trades. Securities borrowing and lending A collateralized loan of securities from one party (lender) of transaction to another party (borrower) was also introduced.
The Securities Clearing Center Company (Muqassa) was established in 2018 as a closed joint stock company fully owned by the Saudi Stock Exchange (Tadawul), with a capital of SAR 600 Mn.
Muqassa's establishment and operation is one of the Financial Sector Development Program 2020 initiatives. In addition, an important component in the future market infrastructure to enhance market efficiency and expansion to new products and services.
Muqassa will contribute to reducing post-trade risks, provide a centralized counterparty risk management, and develop clearing services in accordance with international risk management practices.
To develop the Saudi capital market in alignment with the Kingdom’s Vision 2030, a new strategy was developed for Edaa covering activities that take place in the stock market value chain after a trade takes place.
Looking ahead, Edaa will take a gradual approach to becoming a regional Central Securities Depository A specialist financial institution holding securities either in certificated or uncertificated form, so that ownership can be transferred through a book entry rather than physical transfer of certificates (ICSD); this will settle trades in other securities in the region. The possibility of entering into banking services that will leverage assets under custody to provide securities financing and foreign exchange services will be explored. There is also potential to develop investment fund services.